An HR Audit is a critical tool in helping organizations evaluate policies and procedures across the spectrum of human relations and human capital management to identify issues and determine best practices. An HR SWOT Analysis assists organizations in identifying strengths, weaknesses, opportunities, and threats from a human resource perspective. Conducting an HR SWOT Analysis - often viewed as an “HR Audit-lite”, is a fundamental step in aligning business objectives and HR initiatives to achieve organizational growth and success, as well as providing a functional guide on building HR policies, procedures, and structure. Put simply, both tools can help identify whether an HR department's specific practices and policies are adequate, legal, and effective.
This article will walk through the concepts and practices of an HR Audit and HR SWOT Analysis, providing an overview of the process and practical guidance.
What is an HR Audit?
An HR audit is a process of objectively examining a business's HR policies, practices, and procedures. It's an opportunity for companies to re-evaluate their current HR practices and identify weak spots and potential threats to further improve the effectiveness of the HR function, avoid legal risks, and ensure compliance.
HR audits report on what a company is doing right, what it could be doing better, and how competitive its current HR practices and policies are. Thus, an HR audit digs in both internally and externally, shedding light on their competitors and the industry status quo.
HR audits can be conducted internally or by an outside company that provides a structured process with a team of experienced professionals, usually an HR service provider or consultant. Companies can conduct a comprehensive HR audit or focus on a specific type of audit. There are several types of HR audits: compliance, best practices, strategy, and function-specific. Depending on the state of the business, its length of operation, and any existing concerns or issues, an HR audit usually starts by focusing on areas that are of most concern to a company.
What is an HR SWOT Analysis & Why is it Important?
Traditional HR audits are comprehensive and can be a lengthy and costly process. Most organizations will only want to go through this process once a year or once every couple of years. As the HR ecosystem evolves, more and more companies are adopting an equally effective approach - the HR SWOT Analysis. Tailored to a company's most urgent needs, an HR SWOT Analysis can quickly identify best practices and areas where improvements are needed. It's typically less lengthy and involved and can reduce upfront costs, especially when outsourcing. Insights delivered on a faster timeline can often produce rapid positive outcomes.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is a technique for assessing these four aspects of a business’s function. Aiming to thoroughly investigate and analyze what an organization is lacking or missing and developing strategies and tactics to maximize business outcomes. An HR SWOT Analysis helps develop a comprehensive awareness of all the factors involved in making better business and personnel decisions through an HR lens.
An HR SWOT Analysis enables companies to quickly make corrections and limit regulatory liability that can arise from non-compliance and serves as a useful tool accessible to all sizes of businesses, especially small and mid-sized businesses that may not have the resources or time to conduct a comprehensive HR Audit.
How to Conduct an HR Audit Using an HR SWOT Analysis
An HR SWOT Analysis has several core focuses: Looking inward and identifying what the business is doing both well and where improvement is needed in its HR-related practices, as well as looking externally and identifying what other best practices and challenges - or threats - may be on the horizon, such as regulatory changes. Depending on different companies' objectives at any one time, the focus of an HR SWOT may vary.
Identify Goals / Objectives & Focus
The very first step of conducting an HR SWOT analysis is to set up the organizational goals or objectives for it. Is it to ensure compliance and avoid legal risks? Is it to improve productivity and employee performance? Your goals determine what your HR SWOT analysis will focus on and what procedure it will follow, as well as the audience, techniques, rationale, measurements, and costs.
An HR SWOT analysis typically focuses on the following areas:
- Culture and Employee Engagement
- Employee Development
- Employee Relations
- Health and Safety
- Hiring and Staffing
- Performance Management
- Record Keeping and Compliance
- Termination and Offboarding
After determining the goals and focus of your HR SWOT Analysis, it is time to set up the process. An HR SWOT Analysis shares a similar approach to a comprehensive HR audit.
Determine the Audience
Companies need to determine what audience their HR SWOT analysis will target, which is directly affected by the focus of the analysis. For example, if your HR SWOT analysis aims to identify compliance risks, the primary audience may not include the employees. Instead, it will focus on the HR department, executives or managers. On the other hand, if your HR SWOT analysis is designated to identify gaps in your current policies regarding benefits packages, PTO, performance reviews, and so on, the audience may include a cross-section of employees.
Collect & Analyze the Data
Depending on the type of data and information needed to be collected for a company’s HR SWOT analysis, the data collection methods could vary. Standard data collection practices usually involve surveys/questionnaires, interviews, and documentation review. The audit team should carefully review the existing documents and draft a comprehensive document that covers each subject of the audit and addresses all the questions needed to be answered by the audience. This document will serve as a roadmap to review data and draw results from for the HR SWOT analysis.
HR data analytics may vary depending on the specific organization's size, data size, infrastructure, budget, and industry. Having an HR analytics tool would save time with a streamlined process.
How to Utilize the HR SWOT Analysis Results
After knowing the "what", it is time to dig into the most important part of the HR SWOT - how to utilize the analysis results to fix "the bad" and optimize "the good.” The audit team should summarize the findings in the form of a report that lists areas of risks and improvements, as well as areas of strength and optimization opportunities. With the review and approval of the HR department and executives of the company, an action plan can be created and implemented and will be the most important outcome of the process.
Mitigate the Threats & Weaknesses
A variety of risks may arise in the daily functions of a business and can result in significant harm. An HR SWOT analysis reveals those risks, both externally and internally, that may put your company at risk, whether it's a compliance issue caused by recent law changes, such as minimum wage updates, or employee-related legal risks, such as loopholes regarding leave and benefits policies... These risks can impact the company's growth and further damage employee relations, performance and overall productivity.
For small and mid-size companies that do not have a full HR team, handling potential problems and trying to find a solution all at the same time might be a burden. Outsourcing part of your HR functions to an HR and payroll company can be a tremendous help, especially with their automated and streamlined processes powered by HCM technology.
Optimize the Strengths & Opportunities
HR teams should critically evaluate which areas or processes the company uses that are the most efficient and create the most value. In this process, it is essential for HR personnel to examine the feedback collected from the employees to gain insights into how and why certain things work well. With an in-depth analysis of the strengths and opportunities both internally and externally, companies can optimize their current successful practices and upgrade their policies, structures, personnel, and technology to seek improvements.
Each company is unique and has a differentiation that sets them apart from its competitors in the industry. Identifying the “key strengths” is extremely important and directly affects the path one company takes. Optimization of the key strengths involves improving both the hard assets, such as infrastructure and software, as well as the "softer" assets, such as personnel. Businesses who are unable to handle it on their own can always turn to an HR consulting service provider.
In today's climate, it is becoming more common for companies to conduct an HR SWOT analysis to provide feedback on weaknesses and strengths quickly, and thus corrections can be made dynamically. If you haven’t conducted a thorough review of your HR policies, procedures and practices and how they impact employee relations and organizational performance, you can always seek professional guidance or help from an HR and payroll company like The Human Resource Consulting Group.
Guest Author: Lisa Pollock
Lisa Pollock is the Vice President & Chief Human Resource Officer at The Human Resource Consulting Group and oversees the HR Business Partner Group and HR Operations. She has more than 25 years of experience in human resources, with expertise in building infrastructures for growing businesses focusing on HR compliance, talent acquisition, and implementing best practices. Lisa has extensive experience in industries such as municipalities, non-profit organizations, manufacturing, professional services, and retail.
Prior to joining the HRCG team in 2011, Lisa served as Senior HR Manager at Mercedes-Benz Credit Corporation and as HCM Project Manager at Daimler Chrysler Capital Services. Lisa earned a Bachelor of Science degree from Plymouth State University, and certifications as a Senior Professional in Human Resources (SPHR) and Senior Certified Professional (SCP).